Correlation Between Vanguard Small-cap and First Investors

Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and First Investors at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard Small-cap and First Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Small Cap Value and First Investors Hedged, you can compare the effects of market volatilities on Vanguard Small-cap and First Investors and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard Small-cap with a short position of First Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and First Investors.

Diversification Opportunities for Vanguard Small-cap and First Investors

0.0

Correlation Coefficient

Vanguard Small-cap  First Investors

Pay attention - limited upside

The 3 months correlation between Vanguard and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and First Investors Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Investors Hedged and Vanguard Small-cap is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard Small Cap Value are associated (or correlated) with First Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Investors Hedged has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and First Investors go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and First Investors

If you would invest (100.00) in First Investors Hedged on December 29, 2024 and sell it today you would earn a total of  100.00  from holding First Investors Hedged or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Vanguard Small Cap Value  vs.  First Investors Hedged

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Small-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Investors Hedged

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Investors Hedged has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, First Investors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Small-cap and First Investors

The main advantage of trading using opposite Vanguard Small-cap and First Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, First Investors can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Investors will offset losses from the drop in First Investors' long position.

The idea behind Vanguard Small Cap Value and First Investors Hedged pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.